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Fincash » Mutual Funds » Ultra Short Term Mutual Funds

Ultra Short Term Bond Funds

Updated on January 14, 2021 , 4334 views

Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average portfolio maturity of these funds is generally little higher than that of Liquid Funds.

Ultra SHort Term Bond Fund

Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).

Ultra Short Term Bond Funds Features

Fund Type

Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the redemption day.

For Ultra Short Term Funds, the purchase happens on a (T+0) Basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.

Exit Load of Ultra Short Term Bond Funds

Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.

Returns of Ultra Short Term Funds

The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).

Redemption Ultra Short Term Funds

In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.

Minimum Amount of Investment

The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).

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Investment Avenues of Ultra Short Mutual Funds

Ultra Short Term Funds are fixed Income investments that invest in money market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a Default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.

Why Invest in Best Ultra Short Term Funds?

Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less volatility.

Taxation of Ultra Short Term Funds

In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.

However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.

Liquid Funds Liquid Funds Ultra Short Funds Ultra Short Funds
Class of Investors Individuals/HUF Corporate Individuals/HUF Corporate
Dividend Distribution Tax 27.038% 32.445% 13. 519% 32.445%
Short Term Capital Gains As per income tax Slab Rates As per Income Tax Slab Rates As per Income Tax Slab Rates As per Income Tax Slab Rates

(Please note, investors are advised to consult their Tax consultant before taking any decisions)

Best Performing Ultra Short Debt Funds to Invest FY 21 - 22

Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.

FundNAVNet Assets (Cr)1 MO (%)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)
Aditya Birla Sun Life Savings Fund Growth ₹419.332
↓ 0.00
₹17,2950.212.46.87.67.9
ICICI Prudential Ultra Short Term Fund Growth ₹21.3752
↑ 0.00
₹9,0300.312.56.37.47.8
SBI Magnum Ultra Short Duration Fund Growth ₹4,643.07
↑ 0.28
₹14,5330.20.81.95.77.27.1
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 15 Jan 21

1. Aditya Birla Sun Life Savings Fund

The primary objective of the schemes is to generate regular income through investments in debt and money market instruments. Income maybe generated through the receipt of coupon payments or the purchase and sale of securities in the underlying portfolio. The schemes will under normal market conditions, invest its net assets in fixed income securities, money market instruments, cash and cash equivalents.

Aditya Birla Sun Life Savings Fund is a Debt - Ultrashort Bond fund was launched on 16 Apr 03. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 7.7% since its launch.  Ranked 6 in Ultrashort Bond category.  Return for 2020 was 7% , 2019 was 8.5% and 2018 was 7.6% .

Below is the key information for Aditya Birla Sun Life Savings Fund

Aditya Birla Sun Life Savings Fund
Growth
Launch Date 16 Apr 03
NAV (15 Jan 21) ₹419.332 ↓ 0.00   (0.00 %)
Net Assets (Cr) ₹17,295 on 30 Nov 20
Category Debt - Ultrashort Bond
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderately Low
Expense Ratio 0.39
Sharpe Ratio 2.55
Information Ratio 0
Alpha Ratio 0
Min Investment 1,000
Min SIP Investment 1,000
Exit Load NIL
Yield to Maturity 3.76%
Effective Maturity 6 Months 7 Days
Modified Duration 5 Months 16 Days

Growth of 10,000 investment over the years.

DateValue
31 Dec 15₹10,000
31 Dec 16₹10,924
31 Dec 17₹11,709
31 Dec 18₹12,603
31 Dec 19₹13,669
31 Dec 20₹14,629

Aditya Birla Sun Life Savings Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for Aditya Birla Sun Life Savings Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21

DurationReturns
1 Month 0.2%
3 Month 1%
6 Month 2.4%
1 Year 6.8%
3 Year 7.6%
5 Year 7.9%
10 Year
15 Year
Since launch 7.7%
Historical performance (Yearly) on absolute basis
YearReturns
2020 7%
2019 8.5%
2018 7.6%
2017 7.2%
2016 9.2%
2015 8.9%
2014 9.7%
2013 9.5%
2012 9.7%
2011 9.2%
Fund Manager information for Aditya Birla Sun Life Savings Fund
NameSinceTenure
Sunaina Cunha11 Oct 146.23 Yr.
Kaustubh Gupta15 Jul 119.47 Yr.

Data below for Aditya Birla Sun Life Savings Fund as on 30 Nov 20

Asset Allocation
Asset ClassValue
Cash56.59%
Debt43.41%
Debt Sector Allocation
SectorValue
Corporate47.34%
Cash Equivalent33.17%
Government19.09%
Securitized0.39%
Credit Quality
RatingValue
AA9.31%
AAA90.69%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
182 DTB 04032021
Sovereign Bonds | -
4%₹696 Cr70,000,000
364 DTB 07052021
Sovereign Bonds | -
3%₹495 Cr50,000,000
Mahindra & Mahindra Financial Services Limited
Debentures | -
3%₹450 Cr4,450
182 DTB 11032021
Sovereign Bonds | -
2%₹398 Cr40,000,000
Shriram Transport Finance Company Limited
Debentures | -
2%₹375 Cr3,750
8.83% Govt Stock 2023
Sovereign Bonds | -
2%₹342 Cr30,500,000
↑ 10,000,000
REC Limited
Debentures | -
2%₹331 Cr3,200
Rural Electrification Corporation Limited
Debentures | -
2%₹271 Cr2,650
Muthoot Finance Limited
Debentures | -
1%₹242 Cr2,350
Rural Electrification Corporation Limited
Debentures | -
1%₹231 Cr2,250

2. ICICI Prudential Ultra Short Term Fund

(Erstwhile ICICI Prudential Regular Income Fund)

The fund’s objective is to generate regular income through investments primarily in debt and money market instruments. As a secondary objective, the Scheme also seeks to generate long term capital appreciation from the portion of equity investments under the Scheme.

ICICI Prudential Ultra Short Term Fund is a Debt - Ultrashort Bond fund was launched on 3 May 11. It is a fund with Moderate risk and has given a CAGR/Annualized return of 8.1% since its launch.  Ranked 27 in Ultrashort Bond category.  Return for 2020 was 6.5% , 2019 was 8.4% and 2018 was 7.5% .

Below is the key information for ICICI Prudential Ultra Short Term Fund

ICICI Prudential Ultra Short Term Fund
Growth
Launch Date 3 May 11
NAV (15 Jan 21) ₹21.3752 ↑ 0.00   (0.01 %)
Net Assets (Cr) ₹9,030 on 30 Nov 20
Category Debt - Ultrashort Bond
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 0.96
Sharpe Ratio 2.24
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 1,000
Exit Load 0-1 Months (0.5%),1 Months and above(NIL)
Yield to Maturity 4.61%
Effective Maturity 5 Months 12 Days
Modified Duration 4 Months 20 Days

Growth of 10,000 investment over the years.

DateValue
31 Dec 15₹10,000
31 Dec 16₹10,982
31 Dec 17₹11,743
31 Dec 18₹12,623
31 Dec 19₹13,688
31 Dec 20₹14,582

ICICI Prudential Ultra Short Term Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for ICICI Prudential Ultra Short Term Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21

DurationReturns
1 Month 0.3%
3 Month 1%
6 Month 2.5%
1 Year 6.3%
3 Year 7.4%
5 Year 7.8%
10 Year
15 Year
Since launch 8.1%
Historical performance (Yearly) on absolute basis
YearReturns
2020 6.5%
2019 8.4%
2018 7.5%
2017 6.9%
2016 9.8%
2015 9.1%
2014 14.8%
2013 3.1%
2012 9.4%
2011
Fund Manager information for ICICI Prudential Ultra Short Term Fund
NameSinceTenure
Manish Banthia15 Nov 164.13 Yr.
Ritesh Lunawat15 Jun 173.55 Yr.

Data below for ICICI Prudential Ultra Short Term Fund as on 30 Nov 20

Asset Allocation
Asset ClassValue
Cash49.43%
Debt50.57%
Debt Sector Allocation
SectorValue
Corporate72.06%
Cash Equivalent24.34%
Government3.6%
Credit Quality
RatingValue
A1.53%
AA34.48%
AAA64%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
91 DTB 7012021
Sovereign Bonds | -
4%₹300 Cr30,000,000
REC Limited
Debentures | -
3%₹291 Cr2,850
Reliance Ports and Terminals Limited
Debentures | -
2%₹210 Cr2,019
Manappuram Finance Limited
Debentures | -
2%₹206 Cr2,000
Housing Development Finance Corporation Limited
Debentures | -
2%₹153 Cr1,500
Tata Value Homes Limited
Debentures | -
2%₹151 Cr1,500
Aspire Home Finance Corporation Limited
Debentures | -
2%₹149 Cr1,500
Tata Realty and Infrastructure Limited
Debentures | -
2%₹147 Cr1,250
Power Finance Corporation Limited
Debentures | -
2%₹138 Cr1,350
Small Industries Development Bank of India
Debentures | -
1%₹127 Cr1,250
↑ 500

3. SBI Magnum Ultra Short Duration Fund

(Erstwhile SBI Magnum InstaCash Fund)

To provide the investors an opportunity to earn returns through investment in debt & money market securities, while having the benefit of a very high degree of liquidity.

SBI Magnum Ultra Short Duration Fund is a Debt - Ultrashort Bond fund was launched on 21 May 99. It is a fund with Low risk and has given a CAGR/Annualized return of 7.3% since its launch.  Return for 2020 was 5.9% , 2019 was 8% and 2018 was 7.9% .

Below is the key information for SBI Magnum Ultra Short Duration Fund

SBI Magnum Ultra Short Duration Fund
Growth
Launch Date 21 May 99
NAV (15 Jan 21) ₹4,643.07 ↑ 0.28   (0.01 %)
Net Assets (Cr) ₹14,533 on 30 Nov 20
Category Debt - Ultrashort Bond
AMC SBI Funds Management Private Limited
Rating
Risk Low
Expense Ratio 0.52
Sharpe Ratio 2.59
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 0%
Effective Maturity
Modified Duration

Growth of 10,000 investment over the years.

DateValue
31 Dec 15₹10,000
31 Dec 16₹10,766
31 Dec 17₹11,477
31 Dec 18₹12,386
31 Dec 19₹13,372
31 Dec 20₹14,158

SBI Magnum Ultra Short Duration Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for SBI Magnum Ultra Short Duration Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21

DurationReturns
1 Month 0.2%
3 Month 0.8%
6 Month 1.9%
1 Year 5.7%
3 Year 7.2%
5 Year 7.1%
10 Year
15 Year
Since launch 7.3%
Historical performance (Yearly) on absolute basis
YearReturns
2020 5.9%
2019 8%
2018 7.9%
2017 6.6%
2016 7.7%
2015 8.3%
2014 9%
2013 9.3%
2012 9.3%
2011 8.7%
Fund Manager information for SBI Magnum Ultra Short Duration Fund
NameSinceTenure
Rajeev Radhakrishnan1 May 1010.68 Yr.

Data below for SBI Magnum Ultra Short Duration Fund as on 30 Nov 20

Asset Allocation
Asset ClassValue
Cash58.68%
Debt41.32%
Debt Sector Allocation
SectorValue
Corporate34.99%
Government32.83%
Cash Equivalent32.18%
Credit Quality
RatingValue
AA1.45%
AAA98.55%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
364 DTB 22042021
Sovereign Bonds | -
8%₹1,080 Cr109,000,000
91 DTB 28012021
Sovereign Bonds | -
7%₹998 Cr100,000,000
↓ -100,000,000
Rural Electrification Corporation Limited
Debentures | -
5%₹691 Cr6,750
8.20% Govt Stock 2022
Sovereign Bonds | -
3%₹420 Cr40,000,000
7.80% Govt Stock 2021
Sovereign Bonds | -
3%₹405 Cr40,000,000
↑ 40,000,000
Mahindra & Mahindra Financial Services Limited
Debentures | -
3%₹379 Cr3,000
182 DTB 04022021
Sovereign Bonds | -
2%₹349 Cr35,000,000
91 DTB 14012021
Sovereign Bonds | -
2%₹300 Cr30,000,000
05.54 MP SDL 2021
Sovereign Bonds | -
2%₹299 Cr29,500,000
Housing Development Finance Corporation Limited
Debentures | -
2%₹236 Cr2,300

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Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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